DETROIT Sun Microsystems Inc. chairman Scott McNealy told auto makers Monday (Oct. 16) that they need to connect all their employees to the Internet and begin thinking of themselves as service providers, rather than product makers.
McNealy, speaking to about 1,500 engineers and automotive executives at Convergence 2000, described a future where drivers pay for a vehicle through service fees, where electronic systems track driver behavior, and where consumers bid for gasoline and new vehicles in Internet-based auctions. "You've got to get to the point where the auto industry becomes the service provider," McNealy said. "It should be more like the cell phone industry: Give the phone away for free and charge for the usage."
McNealy said that the service model precedent is already being set in the aerospace industry, where big manufacturers are increasingly bypassing standard business models. "Today, when GE builds an aircraft engine, they own it and they charge by the hour for foot-pounds of thrust used," he said.
Java portal with tires
The key to the new business model is the Internet, McNealy said. "The automobile is going to be a Java portal with tires," he said.
By equipping vehicles with flexible networks and cellular-based telecommunications, automakers can change the driving experience, McNealy said. He described a near-term future in which an automotive driver uses telemetry to connect with vehicle service providers, who, in turn, supply real-time data back to the vehicle. That way, service providers could contact drivers to let them know if they need air in their tires, or need engine service, or even if they are exceeding the speed limit, he said. "On race cars, we get four megabytes of data per lap," McNealy said. "Wouldn't it be nice if we could have the same telemetry in real-time on today's vehicles?"
McNealy also envisioned a future where insurance companies will monitor individual driving habits. For those who have good habits, such as driving near the speed limit on a regular basis, insurers could offer lower rates, he said. Parents could also monitor their children's driving habits using the same means, McNealy said.
The key to implementing such technologies, however, is not yet at hand, he said. For automakers to fully realize the advantages of the Internet, McNealy said they must first work on developing electrical architectures that will easily allow the addition of new features. "Have you ever tried to add a GPS system to an existing car? Or upgrade a car's software?" he asked. "It's not possible. But the new networked car will need the capability to add and delete features."
McNealy also chided car manufacturers for being slow to take advantage of Internet-based business. He used the example of DaimlerChrysler's PT Cruiser, which is now so popular that interested parties must wait seven or eight months for delivery. The PT Cruiser, he said, could potentially be sold for much higher prices, particularly while at the height of its popularity. To accomplish that, he said auto makers should be selling vehicles at Internet-based auctions. There, he said bidders would drive up the price of popular vehicles. "I have a PT Cruiser, but I would have paid three times as much for it at an auction," he said.
Auctions, he said, would enable car manufacturers to take advantage of "dynamic pricing practices," which enable the cost of products to rise and drop like stock values. "The automotive industry is well known for overpricing products that they can't sell, and underpricing products that everyone wants," he said. "That's so last millennium."
McNealy believes the concept of dynamic pricing will affect the automotive industry in dozens of ways. He said that many experts even expect gasoline to be sold at Internet-based auctions. Some day, service providers will broadcast messages that allow automated gas pumps to bid for a consumer's business minutes before they fill their tanks.
McNealy warned, however, that auto manufacturers will not succeed at such efforts until all of their employees use the Internet on a regular basis. "If your employees aren't on the Internet, then you're never going to figure out how to 'dot-com' your business," he said.